Eighteen of 27 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on Sept. 21 and Sept. 22 advised buying gold, which rose 2.1 percent last week to $595.40 an ounce in New York. Six people said to sell, and three were neutral.
European banks face a deadline of tomorrow to reach their annual gold sales limit of 500 tons, and had shed 380 tons of this year's allotment as of Sept. 19, according to the producer- funded World Gold Council in London. In the week ended Sept. 15, bank sales were the most since June, and gold prices fell the most in two months.
``The market should breathe a sigh of relief with the concerns of any lumpy physical gold sales gone for the time being,'' said Mark Pervan, head of research at Daiwa Securities in Melbourne.
Gold futures for December delivery rose $12.40 an ounce last week on the Comex division of the New York Mercantile Exchange. The gain surprised a majority of analysts surveyed Sept. 14 and Sept. 15, who expected a drop. Bloomberg's survey has forecast the direction of prices accurately in 76 of 126 weeks, or 60 percent of the time.
Sales accelerated in the past month as the deadline neared. The European Central Bank said Sept. 19 that three member banks it didn't identify sold gold worth 499 million euros ($635 million) in the week ended Sept. 15. During that period, gold prices dropped 5.6 percent. The sale was the biggest since banks sold gold worth 3.9 billion euros in the week ended June 30.
Under the Limit
ECB members, under the so-called Central Bank Gold Agreement, sold 497.2 tons in 2005, the first year of a five- year deal. The banks sold 2,000 tons in the five-year period through 2004 as part of their first agreement.
``It's unlikely that central banks will reach the 500-ton limit,'' said Paul Yusem, a Lombard, Illinois-based gold investor. ``For gold sales to be this much under the limit is exceptionally bullish.''
Gold, up 27 percent in the past year, has dropped 19 percent from a 26-year high of $732 an ounce on May 12.
Gold may gain on speculation the U.S. Federal Reserve won't raise interest rates again this year, weakening the dollar. Gold and the dollar often move in opposite directions.
The dollar had the biggest weekly drop since June against the euro last week. The euro has risen 8.2 percent against the U.S. currency this year. The Fed kept its benchmark rate at 5.25 percent for a second straight meeting on Sept. 20, after 17 rate increases since June 2004.
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Weaker Dollar
``The big driver for gold in the short and long term is the collapse in the dollar,'' said James Turk, chairman and founder of GoldMoney.com. ``The Fed will not be raising interest rates for a long time. Gold will therefore continue to climb higher.''
Physical demand also may pick up. Jewelers, who accounted for 73 percent of purchases last year, generally stock up in the fourth quarter for the winter holiday season.
``We don't expect demand to slow down over the coming week since many might buy physical gold before prices shift higher,'' said Frederic Panizzutti, a senior vice president at MKS Finance, one of Switzerland's four bullion refiners.
Gold's gains may be limited should oil prices decline for a fifth straight week. Gold had moved higher with oil this year as some investors sought a hedge against inflation when energy costs climbed.
Oil Tumbles
Crude oil has dropped 21 percent from a record $78.40 a barrel on July 14 amid rising U.S. supplies of gasoline, heating oil and diesel. Prices touched $60 last week after hedge fund Amaranth Advisors LLC said wrong-way bets on natural gas wiped out $6 billion in assets this month.
``The upside is very limited,'' said Alex Mathews, head of research at Kochi, India-based Geojit Financial Services Ltd. ``Crude is the only support at the moment, and gold could fall as a rally in oil is unlikely to last.''
Hedge-fund managers and other large speculators decreased their net-long position in Comex gold futures to the lowest level in more than a year during the week ended Sept. 19, U.S. Commodity Futures Trading Commission data show.
Speculative long positions, or bets prices will rise, outnumbered short positions by 77,868 contracts, the lowest since Aug. 5, 2005, the agency said on Sept. 22. Net-long positions fell by 6,354 contracts, or 7.5 percent, from a week earlier.
Prices tumbled 9.8 percent in the two weeks ended Sept. 19.
